The Worldfolio speaks with His Highness Sheikh Ahmad Bin Saqr Al Qasimi, Chairman of Ras Al Khaimah Free Trade Zone (RAK FTZ), about the diversified portfolio of RAK FTZ’s Parks; the opportunities for foreign investors; and the impact of Expo 2020 on the Emirate.
Several centers of power and actors compete in today’s globalized world. Drawing its strength from its tradition of openness and peaceful coexistence, the UAE has struck a unique balance between its deep-rooted culture and customs and the social and economic dynamics arising from globalization. How would you describe the historical and cultural background of Ras Al Khaimah and its evolution in the globalized era?
Historically, one of the major economic activities from which we benefit in Ras Al Khaimah is pearl farming, which produces around 100,000 pearls per year.
Pearl farming represented the basis of the local economy before the process of economic diversification started. The vision of my father, His Highness Sheikh Saqr Bin Moḥammad Al Qasimi, was precisely to diversify the economy from pearl farming.
The creation of the free zone was instrumental to this end as well as to generate more value-added economic activities by attracting foreign companies to invest here.
Ras Al Khaimah has the highest level of industrialization, with manufacturing accounting for approximately 26% of the GDP, which continues to grow.
The government is concentrating on a mixture between tourism and diversifying the industrial sector, specifically manufacturing. Plus, we have the advantage of having five seaports that add value and give more choices for investors as each port has its own specialty.
The bulk shipments that come out of Saqr Port on a daily basis are equivalent to all bulk shipments that come from all the other ports in the Emirates, and it is the biggest in the Middle East.
I also want to add that, Ras Al Khaimah is the most industrialized emirate, thanks to the natural resources such as limestone, rock, and clay, which allowed for the development of the cement, ceramics, manufacturing and building industries.
In addition, Ras Al Khaimah's enticing combination of fertile plains, scenic mountains, white beaches and mangroves, and desert landscapes have boosted the tourism sector in the Emirate, making it one of the oldest continuously inhabited regions on earth.
You have spoken about the diversification and the growing importance of tourism for Ras Al Khaimah, so in this respect, what do you think is going to be the impact of Expo 2020 on Ras Al Khaimah?
Let me be very clear here. People think that Expo 2020 will benefit only Dubai. I think instead it will benefit the whole UAE. Furthermore, Ras Al Khaimah will be an add-on to Dubai, as it will support Dubai.
It is less than an hour’s drive from Dubai and this gives an easy access to all investors to logistical infrastructure through Ras Al Khaimah’s five seaports and its international airport.
Furthermore, given the short distance, Ras Al Khaimah will benefit from transportation, airports, ports and even properties and real estate. In fact, the whole UAE will be benefiting in terms of logistics, tourism, industry and infrastructure, which will result in more employment opportunities.
Dubai will also benefit of course, especially in the real estate market.
Do you think the ongoing developments throughout the whole UAE are going to be sustainable beyond 2020?
Absolutely! Everything that is being built in the UAE is being built for the future, not only for the Expo. For example, the hotels that are being constructed right now are going to benefit and support Expo 2020, but at the end of the day, they are long-term investments.
Today, not everyone can afford to live and to operate a business from Dubai and that is why we look at Ras Al Khaimah as an add-on to Dubai. Today, it is 25% less costly to live and to operate a business in Ras Al Khaimah than in other Emirates.
This is why investors that are coming here to the region because of Expo 2020 could benefit from the variation in the costs and choose to set up a business or to live and reside in Ras Al Khaimah. Moreover, Ras Al Khaimah provides easy access to all investors to logistical infrastructure, given that Ras Al Khaimah and Dubai are a 45-minute drive away from each other.
If you think about it, if you have operated a business from any country, after 5 years you are less likely to leave the country to go somewhere else. That is also another reason why the ongoing developments go beyond Expo 2020.
Compared to other free trade zones, as there are approximately 30 of them in the UAE, what do you think is the comparative advantage of Ras Al Khaimah Free Trade Zone (RAK FTZ)?
RAK FTZ was recognized by fDi Magazine as one of the best free zones in the world for its cost-effectiveness, valuable incentives, strategic location, and excellent facilities. The advantage of RAK FTZ is: number one, that it is a 45-minute drive from Dubai.
The second advantage is that it is more cost-effective to set up companies here with 100% foreign ownership. We have more than 8,000 companies registered here and we are the oldest and largest special economic zone in Ras Al Khaimah, and the second largest free zone in the UAE.
However, we are not going to stop there, we want to be the biggest and the best. By this I mean giving the best services; we are continuously striving to improve our services for our clients so they can increase their margin of profitability compared to what they are spending on licenses to operate here.
There is one more thing that is very important, which is that RAK FTZ has a diversification of parks: an Industrial Park for heavy manufacturing, a Technology Park for trading and light manufacturing, a Business Park for office clients and the RAK Academic Zone which caters to a wide variety of educational institutions and service providers.
Why is it important that we have four different zones? Because this way we can diversify our source of income and give more choices to our clients.
As you said, the bulk of the operations of RAK FTZ revolves around industry and manufacturing. Yet, you went beyond those sectors, to education. What is the purpose of the establishment of the Academic Zone?
We considered the opportunity stemming from many universities that want to set up campuses outside of their home jurisdiction. We have looked into how we can add value to that, so we have coordinated with the Ministry of Higher Education to give them the ratings and help them to set up and build more cost-effective infrastructures.
We are not stopping there as we are also looking at creating a campus. We would like to set up one whole large campus for several universities from the US and elsewhere that want to set up a branch here, so that we can create a positive ecosystem and take advantage of knowledge spillovers through shared services such as auditoriums, conference halls, and why not also food courts. It would be like a cluster on its own.
RAK FTZ has already reached almost 100% occupancy rate. Do you have an expansion plan?
We are working on a 10-year strategy with the CEO here and we are looking at which area we can expand and how. However, for the short term we have this problem of a full occupancy rate, which is sort of a good problem to have!
With this increasing demand and the lack of availability we decided to build and launch additional warehouses; we recently launched 100 flexible warehouses and they almost all are booked already.
The good thing about RAK FTZ is that we find a solution for our partners; we look at our investors as partners and we put our hands together to find a solution for them and the possibility for a win-win deal for both parties.
Since you are also the Chairman of Ras Al Khaimah Investment Authority (RAKIA), could you tell us what is the relationship between these two institutions?
RAKIA is a similar concept to RAK FTZ. Ras Al Khaimah Investment Authority is more into the industrial part I would say, going into joint ventures and partnerships with big companies. RAK FTZ also has an industrial part in a place called Al Hamra, which is adjacent to Ras Al Khaimah Investment Authority.
They are to some extent sister companies and they complement each other. Both Ras Al Khaimah Investment Authority and Ras Al Khaimah Free Trade Zone have the same board of directors.
You said that you visited the US recently; there is great emphasis on increasing strategic communication and partnerships, for example, with the US-UAE Business Council. Which would be the main reasons for multinational corporations or small and medium enterprises in the US to expand here in Ras Al Khaimah?
We were in America recently and we have 200 companies from the US, and it is not an easy number for Ras Al Khaimah because of the American taxation system.
However, we were very successful in giving them the easy access to register a company. Not many people know about free trade zones and the fact that we can offer better services than anyone else.
In this sense, the visit hosted by the US-UAE Business Council was very successful and I look forward to going back there again.
Moreover, that figure is a proof that the American companies are able to take advantage of our hub to distribute in the MENA region and beyond, like Africa and Asia.
I will give a small explanation of why setting up in the free zone is advantageous. To operate in the UAE, there are two ways to start a business; one way is to have a license from the Economic Department, for which you need to have a local partner who owns 51% of the shares.
The other way is to start within a free zone and own 100% of your business. If you look at RAK FTZ, with the easy access to relevant infrastructure such as ports and airports, we act as a gateway to other emerging markets around us.
Then, for the American population who is looking to expand their exports and tap into markets around the UAE, Ras Al Khaimah offers them a very nice and easy set up that is much more cost-effective than in the other free zones.
It is basically a tailor-made solution, as we take our clients by hand and support them until they fully set up their companies.
In terms of job creation, the free zone has contributed immensely to the rise of career opportunities in Ras Al Khaimah. In fact, in 2013 there were more than 5,000 employees working within RAK FTZ registered companies, and in 2014, this number has increased to almost 9,000 employees.
Therefore, we are growing not only in the number of companies but also in the job opportunities created by our investors.
If you want to open a company or an office, you can hire from anywhere in the world and there is no requirement in terms of predefined salary schemes; it is all up to you as an investor, as there is no law that forces companies to pay a minimum wage.
In addition to that, we are the only free zone that allows accommodation on site and the investor can actually build accommodations for its workers. This helps saving in transportation, making it more cost-effective.
How do you see Ras Al Khaimah Free Trade Zone in ten years?
For the last 15 years, everything that has been done in Ras Al Khaimah Free Trade Zone has been very significant. In the next 10 years, I aim for Ras Al Khaimah Free Trade Zone to be a leader in customer service, because the most important thing for us is our clients.